-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, W1qxEebwAS3id/E6p+QArKAep1jHlYoDR5R17NBYP8NCIpG35wrbxKMCpidM8Fz2 iITrmlFIrISb4qohHFBW6w== 0000914317-99-000288.txt : 19990513 0000914317-99-000288.hdr.sgml : 19990513 ACCESSION NUMBER: 0000914317-99-000288 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ESPEY MANUFACTURING & ELECTRONICS CORP CENTRAL INDEX KEY: 0000033533 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 141387171 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04383 FILM NUMBER: 99618928 BUSINESS ADDRESS: STREET 1: 233 BALLSTON AVE STREET 2: CONGRESS & BALLSTON AVENUES CITY: SARATOGA SPRINGS STATE: NY ZIP: 12866 BUSINESS PHONE: 5185844100 MAIL ADDRESS: STREET 1: 233 BALLSTON AVE CITY: SARATOGA SPRINGS STATE: NY ZIP: 12866 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1999 -------------- Commission File Number I-4383 ------ ESPEY MFG. & ELECTRONICS CORP. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) NEW YORK 14-1387171 - -------------------------------------------------------------------------------- (State of Incorporation) (I.R.S. Employer's Identification No.) 233 Ballston Avenue, Saratoga Springs, New York 12866 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, include area code 518-584-4100 ------------ Number of shares outstanding of issuer's class of common stock $.33-1/3 par value as of May 4, 1999: 1,101,308 . Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [ X ] NO [ ] ESPEY MFG. & ELECTRONICS CORP. I N D E X PART I FINANCIAL INFORMATION PAGE Item 1 Financial Statements: Balance Sheets - March 31, 1999 1 and June 30, 1998 Statements of Income - Three Months 3 and Nine Months Ended March 31, 1999 and 1998 Statements of Cash Flows - Nine Months 4 Ended March 31, 1999 and 1998 Notes to Financial Statements 5 Item 2 Management's Discussion and Analysis of 7 Financial Condition and Results of Operations. PART II OTHER INFORMATION 12 SIGNATURES 13
ESPEY MFG. & ELECTRONICS CORP. Balance Sheets March 31, 1999 and June 30, 1998 A S S E T S Unaudited March 31, 1999 June 30,1998 -------------- ------------ CURRENT ASSETS: Cash and cash equivalents ......................... $ 1,084,530 $ 191,739 Short-term investments ............................. 200,000 2,400,000 ----------- ----------- Total Cash and Short-term Investments ............. 1,284,530 2,591,739 Investments securities ............................. 6,653,634 7,235,749 Trade accounts receivable net of $3,000 allowance March 31, 1999 and June 30, 1998 ............................... 2,613,306 1,866,336 Other receivables .................................. 99,449 289,050 ----------- ----------- Net Receivables .................. 2,712,755 2,155,386 Inventories: Raw materials and supplies ...................... 526,507 558,951 Work-in-process ................................. 2,443,844 2,905,269 Costs relating to contracts in process ................................... 8,533,718 5,324,491 ----------- ----------- Total Inventories ................ 11,504,069 8,788,711 ---------- ----------- Deferred income taxes .............................. 357,154 348,514 Prepaid expenses and other current assets .......... 261,259 189,559 ----------- ----------- Total Current Assets ............. 22,773,401 21,309,658 ----------- ----------- Deferred income taxes ....................................... 80,793 80,793
ESPEY MFG. & ELECTRONICS CORP. Balance Sheets March 31, 1999 and June 30, 1998 A S S E T S Unaudited March 31, 1999 June 30,1998 -------------- ------------ PROPERTY, PLANT AND EQUIPMENT AT COST ....................... 12,651,942 12,344,139 Less: Accumulated depreciation and amortization ................................. (9,488,811) (9,160,482) ----------- ----------- Net Property, Plant, and Equipment 3,163,131 3,183,657 ----------- ----------- TOTAL ASSETS ..................... $26,017,325 $24,574,108 =========== ===========
See accompanying notes to financial statements. - 1 - (Continued)
ESPEY MFG. & ELECTRONICS CORP. Balance Sheets, Continued March 31, 1999 and June 30, 1998 LIABILITIES AND STOCKHOLDERS' EQUITY Unaudited March 31, 1999 June 30, 1998 -------------- ------------- CURRENT LIABILITIES: Accounts payable .......................................... $ 605,675 207,886 Accrued expenses: Salaries, wages and commissions ........................ 701,402 583,058 Employees' insurance costs ............................. 55,304 37,472 ESOP payable ........................................... 406,390 -- Other .................................................. 22,128 12,204 Payroll and other taxes ................................ 336,553 43,360 Dividends payable ...................................... 110,246 -- ------------ ------------ TOTAL CURRENT LIABILITIES ............... 2,237,698 883,980 STOCKHOLDERS' EQUITY: Common stock, par value .33-1/3 per share. Authorized 2,250,000 shares; issued 1,514,937 shares March 31, 1999 and June 30, 1998 ........................................ 504,979 504,979 Unrealized gain (loss) on available-for-sale securities, net of income tax ............................. (8,100) 7,260 Capital in excess of par value ............................ 10,496,287 10,496,287 Retained earnings ......................................... 22,911,288 22,671,840 ------------ ------------ 33,904,454 33,680,366 Less: Common stock subscribed ............................ (3,351,974) (3,351,974) Cost of 413,629 shares on March 31, 1999 and 403,717 on June 30, 1998 of common stock in treasury .............................. (6,772,853) (6,638,264) TOTAL STOCKHOLDERS' EQUITY ............. 23,779,627 23,690,128 ------------ ------------ TOTAL .......................... $ 26,017,325 $ 24,574,108 ============ ============
See accompanying notes to financial statements. - 2 -
ESPEY MFG. & ELECTRONICS CORP. STATEMENTS OF INCOME Three and Nine Months Ended March 31, 1999 and 1998 Unaudited Unaudited Three Months Nine Months --------------------------- ---------------------------- 1999 1998 1999 1998 ----------- ----------- ----------- ----------- Net Sales .................................. $ 3,089,547 $ 2,240,347 $ 8,747,908 $ 8,293,629 Cost of sales .............................. 2,637,732 2,697,955 7,271,935 7,921,334 ----------- ----------- ----------- ----------- Gross profit (loss) ...... 451,815 (457,608) 1,475,973 372,295 Selling, general and administrative expenses 421,456 468,375 1,370,974 1,476,201 ----------- ----------- ----------- ----------- Operating income (loss) .. 30,359 (925,983) 104,999 (1,103,906) ----------- ----------- ----------- ----------- Other income Interest income ................... 107,339 137,595 399,400 427,892 Sundry income ..................... 4,025 11,603 4,295 13,192 ----------- ----------- ----------- ----------- 111,364 149,198 403,695 441,084 ----------- ----------- ----------- ----------- Income(loss)before income taxes ............ 141,723 (776,785) 508,694 (662,822) ----------- ----------- ----------- ----------- Provision(benefit)for income taxes ......... 42,000 (269,359) 159,000 (225,359) ----------- ----------- ----------- ----------- Net income(loss) ......... $ 99,723 ($ 507,426) $ 349,694 ($ 437,463) ----------- ----------- ----------- ----------- Basic and dilutive income(loss)per share ... $ .09 ($ .46) $ .32 ($ .39) ----------- ----------- ----------- ----------- Weighted average number of shares outstanding ................................ 1,102,296 1,111,220 1,105,157 1,111,220 =========== =========== =========== ===========
See accompanying notes to financial statements. - 3 -
ESPEY MFG. & ELECTRONICS CORP. Statements of Cash Flows Nine Months Ended March 31, 1999 and 1998 Unaudited March 31 1999 1998 ------------ ------------ Cash Flows From Operating Activities: Net income (loss) .............................................. $ 349,694 $ (437,463) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Tax effect of dividends on unallocated ESOP shares ............. -- 39,085 Depreciation ................................................... 328,329 315,059 Changes in assets and liabilities: Increase in receivables, net .......................... (557,369) (504,216) Increase in inventories ............................... (2,715,358) (350,407) Increase in other current assets ..................... (71,700) (166,515) Increase in accounts payable ......................... 397,789 103,155 Increase in accrued salaries, wages commissions .................................. 118,344 157,153 Increase (decrease) in accrued employee ............... insurance costs 17,832 (4,264) Increase in other accrued expenses ................... 9,924 1,749 Increase in payroll and other taxes withheld and accrued ................... Decrease in income tax payable ........................ 293,193 36,400 Decrease in deferred income taxes ..................... -- (148,606) Increase in accrued ESOP contributions ............... -- (231,970) 406,390 341,778 ------------ ------------ Net cash used in operating activities ........ (1,422,932) (849,062) ------------ ------------ Cash Flows From Investing Activities: Additions to property, plant and equipment ................... Proceeds from maturity of investment securities ................ (307,803) (270,570) Purchases of investment securities ............................. 7,000,000 -- (6,441,885) -- ------------ ------------ Net cash provided by(used in) investing activities ........ 250,312 (270,570) ------------ ------------
ESPEY MFG. & ELECTRONICS CORP. Statements of Cash Flows Nine Months Ended March 31, 1999 and 1998 Unaudited March 31 1999 1998 ------------ ------------ Cash Flows From Financing Activities: Purchase of treasury stock ..................................... (134,589) -- Dividends on common stock ...................................... -- (777,854) ------------ ------------ Net cash used in financing activities ........ (134,589) (777,854) ------------ ------------ Decrease in cash and short-term investments ............................. (1,307,209) (1,897,486) Cash and short-term investments, beginning of period .................... 2,591,739 12,123,583 ------------ ------------ Cash and short-term investments, end of period .......................... $ 1,284,530 $ 10,226,097 ============ ============ Supplemental disclosure of cash flows information Income Taxes Paid ....................................................... $ 110,000 $ 195,000 ============ ============ Dividends payable ....................................................... $ 110,246 -- ============ ============
See accompanying notes to financial statements. - 4 - ESPEY MFG. & ELECTRONICS CORP. Notes to Financial Statements ------------------- 1. In the opinion of management the accompanying unaudited financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation for results for such periods. The results for any interim period are not necessarily indicative of the results to be expected for the full fiscal year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These financial statements should be read in conjunction with the Company's most recent audited financial statements included in its 1998 Annual Report to Stockholders and its 1998 Form 10-K. 2. The income per share computations for the nine months ended March 31, 1999 and 1998 were based on 1,105,157 and 1,111,220 shares, respectively. These represent the weighted average number of shares outstanding for each respective period. Pursuant to the Company's Stock Rights Plan common stock purchase rights under the Plan could potentially dilute earnings per common share in the future. 3. Other income consists principally of interest on Certificates of Deposit, Treasury Bills, money market accounts and dividends on equity securities. 4. For purposes of the statements of cash flows, the Company considers all liquid debt instruments with original maturities of three months or less to be cash equivalents. 5. In fiscal 1989 the Company established an Employee Stock Ownership Plan (ESOP) for eligible non-union employees. The ESOP used the proceeds of a loan from the Company to purchase 316,224 shares of the Company's common stock for approximately $8.4 million and the Company contributed approximately $400,000 to the ESOP, which was used by the ESOP to purchase an additional 15,000 shares of the Company's common stock. - 5 - The loan from the Company to the ESOP is repayable in annual installments of $1,039,605, including interest, through June 30, 2004. Interest is payable at a rate of 9% per annum. The Company's receivable from the ESOP is recorded as common stock subscribed in the accompanying balance sheets. Each year, the Company will make contributions to the ESOP, which will be used to make loan interest and principal payments. With each loan and interest payment, a portion of the common stock will be allocated to participating employees. As of March 31, 1999 there were 146,620 shares allocated to participants. 6. The Company adopted the provisions of SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", as of July 1, 1998. The adoption of this accounting standard had no material effect on the financial position or results of operations of the Company. 7. The Company adopted the provisions of SFAS No. 130, "Comprehensive Income" during the nine months ended March 31, 1999. This statement establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. Total comprehensive income consists of:
Nine Months Ended Three Months Ended March 31, March 31, 1999 1998 1999 1998 --------- --------- --------- --------- Net income (loss) ..................... $ 349,694 ($437,463) $ 99,723 ($507,426) Unrealized loss on available for sale securities ......................... (8,100) -- (15,360) -- --------- --------- --------- --------- Total comprehensive income ............ $ 341,594 ($437,463) $ 84,363 ($507,426) ========= ========= ========= =========
- 6 - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - --------------------- Net sales for the nine months ended March 31, 1999, were $8,747,908 as compared to $8,293,629 for the same period in 1998. Net sales for the three months ended March 31, 1999, were $3,089,547 as compared to $2,240,347 for the same period in 1998. The Company's increase in sales for the three and nine month periods ended March 31, 1999, as compared to March 31, 1998, is a result of the Company beginning to realize the benefits of the continued increase in the backlog that has occurred over the last several quarters. The orders taken in earlier quarters are being completed and shipped as expected. Leading the increase in sales is the increased demand from foreign customers, and for spare parts and commercial power supplies. Net income for the nine months ended March 31, 1999, was $349,694 or $.32 per share compared to a net loss of $437,463 or ($.39) per share for the corresponding period ended March 31, 1998. The net income increase was due to increased Net Sales, favorable product mix and an overall decrease in selling, general and administrative expenses. For the three and nine months ended March 31, 1999, gross profits were 451,815 and 1,475,973, respectively. Gross profits were ($457,608) and $372,295 for the three and nine months ended March 31, 1998, respectively. The increase in gross profit was predominately due to increased efficiency in manufacturing and engineering and favorable product mix. Selling, general and administrative expenses were $1,370,974 for the nine months ended March 31, 1999, a decrease of $105,227, or 7.1%, as compared to the nine months ended March 31, 1998. The reduction is primarily due to a decrease in professional fees and employment related expenses. Other income for the three and nine months ended March 31, 1999, remained relatively the same as compared to the three and nine months ended March 31, 1998. The Company does not believe that there is any significant risk associated with its investment policy, since the majority of it's investments are represented by United States Government Treasury Securities, preferred equity securities, and a money market account. - 7 - Liquidity and Capital Resources - ------------------------------- As of March 31, 1999, the Company had working capital of $20.6 million compared to $20.1 million at March 31, 1998. The Company meets its short-term financing needs through cash from operations and when necessary, from its existing cash and short term investments. The table below presents the summary of cash flow for the periods indicated:
Nine Months Ended March 31, ------------------------------------ 1999 1998 ---------- ----------- Net cash used in operating activities $1,422,932 $ 849,062 Net cash provided by (used in) investing activities 250,312 (270,570) Net cash used in financing activities 134,589 777,854
Net cash used in operating activities fluctuates between periods primarily as a result of differences in net income, the timing of the collection of accounts receivable, purchase of inventory, level of sales and payment of accounts payable. The decrease in cash used in financing activities is due to the suspension of the 1998 annual dividend by the Company's Board of Directors. The Board reinstituted the payment of a quarterly dividend at the February Board of Directors Meeting. A quarterly dividend in the amount of $.10 per share was declared payable on April 1, 1999 to shareholders of record on March 1, 1999. The Board of Directors will continue to evaluate the quarterly dividend policy and declare dividends based on the Company's financial performance. The Company believes that the cash generated from operations and when necessary, from cash and cash equivalents, will be sufficient to meets its long-term funding requirements. For the first nine months of fiscal 1999 capital expenditures were approximately $308,000. Since the debt of the Company's ESOP is not to an outside party the Company has eliminated from the Statements of Income the offsetting items of interest income and interest expense relating to the ESOP. The Company has eliminated the offsetting accruals from the Balance Sheets. During the nine months ended March 31, 1999, the Company repurchased 11,062 shares of its common stock from the Company's ESOP and other private transactions. Under existing authorizations, as of March 31, 1999, funds in the amount of $1,749,402 were available for the continuing repurchase of the Company's shares. - 8 - Business Outlook - ---------------- The Company continues to diversify its customer base and product line. The backlog at March 31, 1999, was approximately $16,025,000, an increase of 39% over the prior year. The Company continues to have higher net sales while maintaining and replenishing the backlog. Management expects this trend to continue. Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Business Outlook" of our 1998 Form 10-K, and the President's message accompanying our 1998 Annual Report to Shareholders, describe in detail the products of the Company and the type of contracts the Company expects to receive. Accounting Pronouncements - ------------------------- In June 1997, Statement of Financial Accounting Standards No. 130, "Comprehensive Income" was issued. Statement No. 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Statement No. 130 requires that all items that are required to be recognized under accounting standards as components of comprehensive income are to be reported in a financial statement that is displayed in equal prominence with other financial statements. The Company adopted Statement No. 130 as of July 1, 1998. See note 7 to the financial statements. In June 1997, Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information " was issued. Statement No. 131 establishes standards for the way that a public enterprise reports information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to stockholders but not for interim periods in the initial year of adoption. Statement No. 131 is effective for fiscal years beginning after December 15, 1997. The Company believes that it operates as one segment and Statement No. 131 did not have material effect on its financial statements. Year 2000 Issues - ---------------- The Company's Year 2000 team has the responsibility of identifying and resolving significant Year 2000 issues in a timely manner. In addition, management continues to monitor the status of the Company's Year 2000 remediation. - 9 - The process has included an assessment of issues and development of remediation plans, where necessary, as they relate to internally used software, computer hardware and use of computer applications in the Company's manufacturing processes and products. In addition, the Company is engaged in assessing the Year 2000 issue with significant suppliers. The Company continues to communicate with its significant suppliers and large customers to determine the extent to which the Company is vulnerable to those third parties' failure to remediate their own Year 2000 issues. To date no significant issues have been identified as to internally used software, computer hardware and use of computer applications in the Company's manufacturing processes and products. In addition, no issues have been identified regarding significant suppliers and large customers. Finally, with regard to products sold by the Company, management has determined that contingencies related to the Year 2000 Issue will not have a material adverse effect. Accordingly, the Company has not established a contingency plan and does not anticipate creating such a plan. The Company is utilizing both internal and external resources to reprogram, or replace and test, the software it currently uses for Year 2000 modifications. The Company has substantially completed its Year 2000 assessment and remediation. The total project costs to date related to the assessment and remediation of its Year 2000 issues are not material. With regard to its internal Year 2000 compliance program, the Company has completed approximately 98% of its review and, when necessary, 100% of remediation. With regard to its Year 2000 compliance program addressing the status of the Company's suppliers and customers, the Company has completed approximately 95% of its review. Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995. It should be noted that certain statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The terms "believe," "anticipate," "intend," "goal," "expect," and similar expressions may identify forward-looking statements. These forward-looking statements represent the Company's current expectations or beliefs concerning future events. Any or all of the Company's forward looking statements may turn out to be wrong. The matters covered by these statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements, including the Company's dependence on timely development, introduction and customer - 10 - acceptance of new products, the impact of competition and price erosion, as well as supply and manufacturing constraints and other risks and uncertainties. The foregoing list should not be construed as exhaustive, and the Company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. - 11 - ESPEY MFG. & ELECTRONICS CORP. PART II: Other Information Item 4. Submission of Matters to a Vote of Security Holders ---------------------------------------------------- None Item 5. Other Information ----------------- None Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits EX-27 - Financial Data Schedule (for electronic filing only) (b) Reports on Form 8-K Form 8-K, filed February 22, 1999, reporting under Items 5 and 7, announcing an amendment to certain provisions of the Rights Agreement dated March 31, 1989 . - 12 - S I G N A T U R E S Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ESPEY MFG. & ELECTRONICS CORP. May 11, 1999 /s/ Howard Pinsley ------------------ Howard Pinsley, President and Chief Executive Officer May 11, 1999 /s/David O'Neil --------------- David O'Neil, Controller and Assistant Treasurer - 13 - EX-27 2
5 9-MOS JUN-30-1999 MAR-31-1999 1,284,530 6,653,634 2,712,755 0 11,504,069 22,773,401 12,651,942 (9,488,811) 26,017,325 2,237,698 0 0 0 504,979 0 26,017,325 8,747,908 8,747,908 7,271,935 7,271,935 1,370,974 0 0 508,694 159,000 349,694 0 0 0 349,694 .32 .32
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